Are we required to see it?

[Questionguy101]

Clients claimed he has over $100,000 of gambling loss to offset all of his gambling win during the year. You explain to him the requirement of a gambling loss diary record. He says he understands. You ask him to show the record to you. He asks you why. He says he wants to keep the record to himself due to privacy issue. But he is willing to sign a statement for you certifying that you have already explained to him the record requirement and that he has such a record in his possession.

What's next?

[JohnH]

How close is HRB or JH to your office?
I'd locate their phone number and address for him - maybe even print out mapquest directions for him...

[Uncle Sam]

Are we required to see it?

We are not auditors.

If a client is willing to put in a written document that he has documentation to prove his losses and states that you have advised him of the rules - I don't see why you can't take the deduction.

[Snaggletooth]

Required?

Uncle Sam may be correct that we are not "required" to see the records. I don't know what extent the IRS "requires" us to audit. By the same logic, we are not "required" to see mileage logs.

However, if I were preparing this return I would have my OWN standards of due diligence. And if he gave me an excuse of wanting to keep this private, I would send him packing. Somehow, I doubt this register of losses qualifies as a matter of national security.

[RitaB]

Know When To Fold Em

Totally unrelated, but you know me and my stories.

I have a little retired couple here, whom I have undercharged for years because I thought they were broke. Every year, they scramble around finding medical bills, church contributions, non-cash donations (hauled junk to Goodwill), that don't help. Every year they owe IRS $100 - $200, and they act like it's SUCH a burden to pay it.

Well, last week they came in, and WA-HOO! they had won $768 in Vegas. Las Vegas. Nevada. And they only spent $6,000 in that casino, too.

The Public Service Division of my Tennessee business closed at that moment.

[JohnH]

Exactly. It's a matter of whether the tax preparer is going to set his own standards for his particular office and client situation. Or is he going to alow the client to do that? Once you allow the client to set your policies, the possibilities are endless. I wouldn't be surprised to know this isn't the only demand the client is making.

For a moderate amouont of gambling winnings and losses, I'd be OK with a signed statement. But for $100K, I'd want to see the diary and STILL expect the client to sign a restrictive statement for my files. I think good business practice is all about the art of making distinctions.

[AZ-Tax]

Sent him packing

Uncle Sam may be correct that we are not "required" to see the records. I don't know what extent the IRS "requires" us to audit. By the same logic, we are not "required" to see mileage logs.

However, if I were preparing this return I would have my OWN standards of due diligence. And if he gave me an excuse of wanting to keep this private, I would send him packing. Somehow, I doubt this register of losses qualifies as a matter of national security.

I have sent former clients packing for less then this. Reminder, he receives a letter from the IRS, guess who also gets involved.

[Burke]

For a moderate amouont of gambling winnings and losses, I'd be OK with a signed statement. But for $100K, I'd want to see the diary and STILL expect the client to sign a restrictive statement for my files. I think good business practice is all about the art of making distinctions.

I was going to say the same thing. I might not quibble over a couple of hundred $$$. But $100K? You gotta be kidding. Show me. And if I did not like what he showed me, I might still say, sorry.

[Questionguy101]

I was going to say the same thing. I might not quibble over a couple of hundred $$$. But $100K? You gotta be kidding. Show me. And if I did not like what he showed me, I might still say, sorry.

In case the client got audited and exposed that he actually does not have the gambling loss record, what consequence might the tax preparer have to face? Does anyone know?

If that's really the case, the tax preparer would have been cheated by the client too. But I guess someone might also be able to make an argument that he has not pursued hard enough to inspect the gambling record of the taxpayer.

[taxea]

You need the win/loss statement from the casino or print out the form in your program and have the client fill it out. Tell him this is how it is reported and you don't need his log but you do need the info on the program form.

[JohnH]

Casino win/loss statements are useless.
Correction - they are worse than useless.

BTW, here's a link to a very good web site concerning gambling income.
I don't have any financial interest in it, other than having bought their diaries for a couple of my clients who show up every year with W-2Gs in the tens of thousands of dollars. (They do keep proper records, and none of their information is so secret that they can't show it to their tax guy)

http://www.ladyluckdiary.com/why-does-the-irs-ignore-casino-winloss-statements/

[geekgirldany]

With that large of loss I would have to see his records. Like was said if you are suppose to inquire and see mileage records then I think gambling records would be the same.

[joanmcq]

One of my long time clients (and long time acquaintance) came in saying 'the bug' had bit him again. He had a fistfull of W2Gs. Tens of thousands of dollars worth of jackpots. We sat outside talking about addiction and he described the feeling of not being able to walk away from the slot machine even after winning.

I don't have any doubt that he played the wins until the money ran out, but I haven't looked at the amount or the docs he has yet.

[ToledoEd]

I had a client who wrote off a little more than $20,000 in gambling losses, but he brought me his evidence, more than enough losing lottery and horse track slips. I told him that this would probably get him audited, and it did. But the IRS accepted his proof and actually gave him credit for deductions that he did not think that he had enough evidence to claim. He was a race horse owner/trainer and had to be at the track everyday to work out the horses, and so he spent his lunch time betting on the offsite races. His losing slips covered the entire year. The IRS agent at first figured he had just grabbed a bunch of losers after winning, but after working thru over half the year he decided that my client had indeed been collecting the slips for thru out the year and allowed the deduction.

I would tell the client to show me the evidence, or to provide a detailed listing of what his evidence is, (Is it a log only, is he counting on a casino players club statement, does he have a box full of losing tickets, ???), along with the letter confirming your conversation and his responsibility to provide the evidence.
Good luck.

[JohnH]

And of course remember to check for heel marks on the losing slips.